Trends In SME And Large Enterprise Credit And Deposits: Q4 2019

These data, as at Q4 2019, predate the arrival of the Covid-19 virus to Ireland in early-2020. Therefore the subsequent impact of its economic implications on business lending and deposits in Ireland will not yet be visible in the data. As Irish firms deal with the economic consequences of Covid-19, there may be an increase in demand for bank financing (e.g., overdrafts/bridging finance) among certain sectors if internal funds and other liquid assets prove insufficient to meet commitments. Even outside of sectors directly impacted by the Covid-19 measures, any supply-chain issues or a slowing of global trade may pose financial challenges for other firms, particularly in the export sectors. The recent growth in deposits, particularly in the overnight or short-dated maturity categories may, however, provide a source of funds for certain companies. Emergency policy measures by both fiscal[1] and monetary authorities[2] in Ireland and Europe may also provide a buffer.

At this point, however, the eventual impact on SME and Large Enterprise credit and deposits is unclear. The Central Bank of Ireland’s Money and Banking Statistics, which are published at a monthly frequency, may prove useful for assessing this evolving situation until the next quarterly release. 

Financing conditions and economic developments in Ireland are changing rapidly and there is still significant uncertainty.  The Central Bank of Ireland Statistics Division will continue to collect and publish statistics for users to the greatest extend possible during this crisis.

Deposits by Irish private sector enterprises (ex. Financial Intermediation) continued to grow over the final quarter of 2019, growing by 5.9 per cent quarter on quarter or 17.1 per cent year-on-year. This is the largest y-o-y increase in deposits since the series began, driven primarily by the Manufacturing and Business & Admin sectors.   The Q4 data also show that while overall credit to SMEs continued to contract, there was evidence of higher new lending by these firms.

SME Credit developments

  • The outstanding stock of SME credit on the balance sheets of Irish banks declined at a rate of 1 per cent quarter on quarter, and by end-Q4 2019 stood at €21.5 billion. Core SME credit[3] accounted for €14.3 billion of all SME lending and €7.1 billion was attributed to property related sectors.
  • Net lending to SMEs was €311 million in Q4 2019. This represents the largest quarterly increase in lending since the series began. Annually, repayments exceeded new lending by €759 million by the end of 2019 (Chart 1).
  • Gross new lending to SMEs was €1.6 billion during the final quarter of 2019, 31 per cent comprising of property-related lending (Chart 2).[4] Gross new lending to SMEs was €5.4 billion in the year to end-December, a 1 per cent increase when compared to end 2018.
  • Repayments by SMEs were subdued in the fourth quarter at €1.3 billion; this is the lowest volume of end-year repayments since the series began, down from a series high of €3.5 billion in Q4 2010.[5] SMEs in property-related sectors accounted for 54 per cent of repayments in  Q4 2019, with €705 million of debt repaid (Chart 3).

Core SME Credit developments

  • Gross new lending to core SMEs was €1.1 billion over  Q4 2019, representing a 9 per cent increase on Q4 2018.  Overall, new drawdowns totalled €3.6 billion over the past twelve months, reflecting a 4 per cent year-on-year increase. Net lending to core SMEs was €509 million over the quarter.

Interest rates on loans to SMEs

  • The weighted average interest rates on outstanding SME loans was 3.6 per cent in Q4 2019. This represents an increase of 13 basis points over the year (Chart 4).
  • The interest rate on new SME loan drawdowns remained the same in Q4 2019, and stood at 3.88 per cent. SME interest rates varied largely between sectors. Higher than average rates were charged in the primary industries and business/administration sectors (Chart 5).

Private-Sector Enterprise Credit developments

  • The total outstanding amount of credit to all Irish resident private-sector enterprises stood at €74.2 billion. This was driven by a decrease in lending to large enterprise by €3.5 billion, which was slightly offset by an increase in SME lending of €311 million.
  • Credit advanced to core private-sector enterprises increased by €427 million or 1.5 per cent over the year. Core credit to all enterprises amounted to €28.8 billion at end-Q4 2019.
  • Net Lending to large core enterprises decreased by        €570 million in Q4 and increased by €580 million annually (Chart 6).

Private-Sector Enterprise Deposit developments

  • Deposits from all Irish private-sector enterprises increased by €9 billion over the quarter and €18.4 billion over the year, representing the largest annual increase since Q3 2006. Deposits from enterprises engaged in core sectorsincreased by €2.7 billion in the quarter, to stand at €57.9 billion.